Difference Between Centralized, Decentralized and P2P Cryptocurrency Exchanges-MLM software Tamilnadu



  • Cryptocurrency Exchanges has been modifying its architecture from the day of its birth. In the very initial days, Cryptocurrency Exchanges are designed to function in the centralized network as days go, this business gains popularity and stands straight as a promising business model. Later then, technology demands Crypto Exchanges to incorporate multiple dimensions.

    The core design of crypto exchanges is to act as the platform where one can buy or sell virtual currencies. Based on the working methodologies, functionalities, integrated features, service they are broadly classified as

    Centralized Exchange 
    Decentralized Exchange 
    P2P Exchange 
    

    What are Centralized Exchanges?

    Centralized Exchanges are the earliest version of exchanges. It is the kind of ecosystem built with trust as the backend. Here, the admin of the Exchange has direct control on trading All the data, funds are stored in the central server. i.e, the single pathway for data. It enables quick and easy data handling.

    How Centralized Exchanges Work?

    Centralized Exchanges more or less functions as a bank. The admin is the one and only the central authority of the exchange. Users store their own assets inside the exchange. Traders of the exchange might have their own individual private keys to access their Crypto wallets but all the assets are stored in the Centralized Server.

    It allows

    Fiat to Crypto trading
    Crypto to Crypto trading
    

    Benefits of centralized exchange

    Liquidity

    Liquidity increases with the increase in the user's basis. Centralized Exchanges have more liquidity than other kinds of Exchanges. Till now these exchanges remain popular among traders.

    Fast Transaction

    In Centralized Exchanges, the funds and data are stored in the central server, there is a single way path for data, once the trade matches, the transaction happens instantly.

    Easy maintenance

    Centralized Exchanges are easy to maintain quite easy to handle and maintain as there is a central server for storage.

    User friendly

    Centralized Exchanges provide a rich user-friendly experience and high tech features for features.

    What are Decentralized Cryptocurrency Exchanges?

    Decentrailzed Exchanges or DEX evolve with the primary concern of solving the problems and inconveniences in the centralized exchanges. This platform runs directly on the blockchain network. Here, trading happens automatically under smart contracts without the involvement of third parties.

    How DEX works?

    In Dex, a Smart contract is everything that does the job of Escrow service as well as order matching engines. like centralized exchanges users, need not store their assets inside the exchange. Here, traders own full authority for their assets and can store funds in the private wallet or cold wallet. It supports the only crypto to crypto trading, fiat to crypto trading is not applicable in the case of DEX.

    Atomic Swap

    Atomic Swap is the kind of technology incorporated in the DEX, that let traders exchange the pair of Cryptocurrencies belonging to a distinct blockchain network.

    No Splitted Trading

    In DEX, the user can’t implement splitted trading as all the order matching is under a smart contract. End to end trading alone can be executed.

    Noncustodial assets

    In decentralized exchanges, traders need not store their assets inside the exchange. Users have full accessibility and freedom to store and use their assets in the way they wish.

    Benefits of decentralized exchange

    Security

    The most indispensable and notable benefit in the DEX is security. The chances of hacking and theft are very low here as all the funds are stored outside the exchange under the trader's governance.

    Secured Data Storage

    All the transaction data, users' data are stored in the distributed ledger technology which is immutable and can’t be stolen.

    Anonymous trading

    DEX Supports anonymous trading KYC is not a compulsion in decentralized exchanges.

    Yet, DEX has limitations such as

    Low liquidity
    Inability to restore data
    Low speed
    Scalability issues
    

    How P2P Exchange works?

    In DEX, the transaction speed is less than centralized exchanges. Peer to Peer Exchange matches people behind the trading and the platform acts as the Escrow account during transaction.

    It support
    Fiat to crypto trading (via bank)
    Crypto to crypto trading

    Escrow

    Escrow is the fundamental thing in P2P Exchanges, all the transactions are handled securely within the escrow wallet

    Custodial assets

    Traders need to send cryptos to the Escrow wallet of the exchange during trading but they no need to store assets on the exchange.

    OTC trading

    OTC trading is supported here, traders can sell cryptos in the exchange and can get the desired amount via banks or in person.

    Key Benefits

    Secured trading
    Fast transaction
    Anonymous trading
    

    As of now, most of the Cryptocurrency Exchanges are centralized. The trade volume of Centralized exchange is very much higher than that of DEX and P2P Exchanges. Slowly and steadily these exchanges gear up and prepared themselves for the race. Yet, we should remind the truth that these two are in the early stage and some other user-friendly features need to be adopted.
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